Super funds that allow you to invest in ETFs & LICs

There is a really good summary of which super funds allow you to invest in ETFs and LICs on etfwatch.

Which super funds allow you to invest in ETFs & LICs?

Must admit Hostplus fees look very cheap, and surprising the amount of LICs available on LegalSuper.

Anyhow, check it out - it does answer a lot of questions raised on this forum. Certainly, a very cost alternative to an SMSF if the SMSF is only going to hold listed products.

 

Hostplus has 3 LIC's listed but the link shows 4 (AFI,ARG,MLT, MIR)

 

A couple of questions!
Of course the beauty of LICs is that in theory you collect your dividend stream whilst the underlying capital remains intact or hopefully shows a modest increase.
Is there another option with less paperwork and stress?
What if you invest in an industry super fund that makes 10% a year and you have to withdraw 5% a year as you are in pension phase.
In pension phase every year the fund sells some of your units to enable your withdrawls but will this be covered by the 10% increase in the unit price per year? I looked at some modelling that suggested over the long term your capital would still decline over time. In an industry or retail pension fund is your money always going to decline if you hold units? If that is the case then it would be better to hold LICs within Legalsuper.

Or is the problem that in an extended downturn your unit prices decline and they are still selling your units.

(Incidentally Hostplus has three property options and one infrastucture option (all unlisted) that are making 10% per annum and holding these would seem to lessen the impact of a sharemarket downturn.)

 

You're focusing too hard on nominal returns.

Say an LIC has an NTA of $1 a share and makes 5% a year. It then pays out 5 cents a year. It's NTA will remain at $1, but in real terms, this $1 is worth less on a yearly basis.

Apart from differences in fee structures/taxation and differences in performance of the underlying funds, it makes no difference whether your super is invested in products offered by the fund or LICs. If you have a reason to believe that (for example) AFI will outperform whatever Australian Shares option hostplus has, you have a reason to look at that. Otherwise there's no significant difference - a 10% absolute return is 10% and a 5% absolute return is 5%.

 

A Corporate SMSF can have up to 4 members.

Getting relatives or close friends together who are like minded to split the setup/admin fees means you could possibly do it cheaper than super funds depending on the combined balance size.

 

I think the problem lies in your math/modelling, if gains are 10% and withdrawals are 5% your balance will increase. Each year you need to sell less units to get your 5%. If you provided the modelling someone might point out what is going on.

 

What may not have been realised is that the minimum withdrawal will increase above 5% as you get older (ie it will go up to 11% p.a. at age 90-94, then 14% p.a. at age 95 and over).

The question about whether your super balance will increase or decrease over time is a factor of the cumulative increases (ie returns/contributions) vs the cumulative decreases (pension payments/other withdrawals).

It is certainly the intent of the underlying policy on pension funds that your balance will decrease over time; and should 'expire' when you reach around your life expectancy - personally, I've never seen anyone run out of money (in an SMSF) without a deliberate intent to use up their super balance.

 

I’d like to see improved regulations to allow better competition and reduced fees.

One thing needed is an industry standard for minimum offering. ING’s list is the benchmark for that but it should be set by an industry body.

General thought is transferability of holdings between providers without being hit by CGT. Much like you can do with personal share holdings.

 

Aren't the basic index funds run by superannuation the similar as LIC's in the sense that they are diversified? Why would you pay extra to have choice plus and then buy LIC's, thereby paying much more in fees?

 

The advantage of holding direct shares within an industry super fund would be that you would still receive franking credits under the proposed ALP scheme but you would not receive them if you held the same shares within a SMSF or as an individual.

Hostplus seems to have a big variety of investment options which includes some very cheap index funds as well as some more costly options which have performed well. Some of these options provide access to managed funds which would be difficult to replicate for an individual investor.

Reducing the opportunities for 'fiddling' is another reason I may change over to an industry fund.